6.  The applicant, Mr Vörður Ólafsson, is an Icelandic national who was born in 1961 and lives in Reykjavik.
7.  The applicant is a master builder and is a member of the Master Builders’ Association (“the MBA”). Under the Industry Charge Act (Law no. 134/1993 – “the 1993 Act”), he was under an obligation to pay a levy known as the “industry charge” to the Federation of Icelandic Industries (“the FII”), an organisation of which the applicant was not a member and to which the MBA was not affiliated. The 1993 Act provided that a charge of 0.08% should be levied on all industrial activities in Iceland as defined in the Act. The definition included all activities coming under activity code numbers enumerated in an appendix to the Act. Private-sector enterprises not covered by the code numbers were not subject to the industry charge. This was the case, for example, for enterprises in the meat-processing, milk-processing and fish-processing industries. Other enterprises in the food and drink industry were covered. Enterprises entirely under public ownership or established by special statute were not covered (section 2). Revenues from the industry charge were to be transferred to the FII, and were to be used for the promotion and development of industry in Iceland (section 3). The State Treasury was to receive 0.5% of the charge collected in order to cover the costs of its collection (section 1).
8.  More than 10,000 persons (legal persons and self-employed individuals) paid the industry charge. The FII had between 1,100 and 1,200 members (enterprises and self-employed individuals).
9.  The Government supplied copies of the FII’s reports to the Ministry of Industry regarding the disbursement of the industry charge for the years 2000, 2003 and 2006.
10.  The FII’s report for the year 2003 (dated 4 July 2004) stated:
“The Federation’s accounts have not indicated whether particular operational items are paid for with funds from membership fees, capital income or the industry charge, because an overwhelming proportion of its work benefits industrial companies whether they are members of the Federation or not. The Ministry of Industry has not expressed any reservation regarding this arrangement, and legislation concerning the industry charge imposes no other requirements.
The Federation and the Ministry of Industry are, however, in agreement about the requirement for a more detailed account of how the industry charge is disbursed, and that has been done in this report.”
11.  Under the title “Disbursement of the industry charge in 2003 according to the Federation’s accounts”, the report included a table showing the “Income and expenditure according to the Federation’s audited accounts for the year 2003”. In a separate column the table indicated the percentage of funds originating from the industry charge in relation to each item and sub-item. This included the following items: “Operating profits” and “Operating expenses”. It also detailed “Further itemisation of disbursement of the industry charge according to the accounts”, namely: (1) “Wages and related expenses”; (2) “Meetings and conferences”; (3) “Promotional activities”; (4) “Publications”; (5) “Branches and special projects”; and (6) “General and administrative expenses”.
For each of these sub-items the report contained explanatory notes, providing information on the treatment of members as compared with non-members. For example, under sub-item (1) it was stated that 2.5 of the 20 man-years concerned work that benefited members only. With reference to sub-item (3) it was stated that FII exhibitions were open to everyone and that FII members enjoyed a discount on participation fees. Under sub-item (5) it was stated that non-members could access the quality management project but would be charged a higher fee than members.
12.  From the table it appears that in 2003 the FII’s operating revenues totalled 315,800,000 Icelandic krónur (ISK), of which ISK 197,359,000 had originated from the industry charge transferred to the FII by the State Treasury; ISK 84,973,000 from membership fees; and ISK 33,468,000 from other income. That same year, the operating expenses had totalled ISK 289,654,000, of which ISK 234,617,000 (81%) had been spent on public projects (comprising ISK 197,359,000 derived from the industry charge and ISK 37,258,000 from membership fees and other income).
13.  The Government explained that in fulfilling its role and objectives of promoting Icelandic industry pursuant to section 3 of the 1993 Act, the FII notably worked to develop and protect the image of the industry, allocated large amounts of the funds obtained though the industry charge to training, gave opinions on behalf of the business community on draft legislation and regulations in the sphere of environmental affairs, and instilled in public authorities the need to observe restraint in public procurement and to observe clear and transparent tender rules.
14.  At the material time, the applicant paid the following amounts in industry charge for the years indicated: for 2001 ISK 23,023 (255 euros (EUR)); for 2002 ISK 20,639 (EUR 229); for 2003 ISK 12,567 (EUR 139); and for 2004 ISK 5,946 (EUR 66).
15.  On 8 November 2004 the applicant lodged proceedings against the State with the Reykjavik District Court, requesting an order to exempt him from the charges imposed on him in respect of the years 2001 to 2004.
16.  By a judgment of 13 July 2005, the District Court found in favour of the State and dismissed the applicant’s action.
17.  The applicant appealed to the Supreme Court of Iceland, arguing, inter alia, that section 3 of the 1993 Act meant that all individuals and companies engaged in particular business activities had to pay membership fees to the FII, irrespective of whether they were members or not. The applicant considered that Article 14 of the Articles of the Federation, which provided for the membership charge, clearly reflected its nature in that, as was provided therein, FII members paying an industry charge which was transferred to the FII should have that part deducted from their membership fees. Thus, by the levy and collection of the charge, membership of the FII was in fact made compulsory for others, although they enjoyed no rights vis-à-vis the FII. Consequently, the industry charge was merely a membership fee to the FII. The applicant submitted that he was a member of the MBA, to which he paid his fees and through which he considered his interests to be best served, and he had no wish to be a member of the FII. The latter pursued policies with which he disagreed and which were contrary to his own interests. The compulsory membership of the FII was incompatible with his right to freedom of association as protected by Article 74 § 2 of the Icelandic Constitution and Article 11 of the Convention. The applicant also argued that by virtue of the 1993 Act, he was unjustifiably taxed in excess of other taxes and that, under the Act, a limited group was being taxed “for the benefit of another limited group or the restricted interests of others”. Finally, he submitted that the imposition of the charge amounted to discrimination in breach of Article 65 of the Constitution, as the taxation was dependent upon the ownership structure of an enterprise, and the enumeration of activity code numbers, on which the taxation was based, was haphazard in nature.
The State disputed the applicant’s submission that the industry charge constituted a membership fee to the FII. They argued that by law it was a tax levied by the State on particular groups of individuals and legal persons, in accordance with general and applicable standards, without anything being required in return. By the same Act, the decision had been taken to have the charge transferred to the FII, which was to use it for the promotion and development of Icelandic industry. Such an allocation of tax revenues to an association provided for by law did not mean that those who paid the relevant tax were thereby obliged by law to become members of it. The charge was not expected to be used for the benefit of the members alone, but for the benefit of all industries and industrial development in Iceland, under the supervision of the Ministry of Industry. Any discounts on membership fees were decided unilaterally by the FII, without any connection to the assessment and collection of the charge. The State also denied that the 1993 Act involved discrimination between persons who were in the appellant’s situation and those who enjoyed an exemption from the charge. It was a reasonable and objective arrangement to exempt public enterprises from the charge, and it was in the nature of things that the considerations that applied to companies under public ownership were different from those relating to private enterprises. The State also argued that public support for industry and industrial development sometimes took the form of launching industrial activities that others were not capable of initiating. Finally, the number of publicly owned industrial enterprises had been greatly reduced in recent years. The State also disputed the allegation that the enumeration of activity code numbers governing the taxation had been haphazard.
18.  By a judgment of 20 December 2005, the Supreme Court, by four votes to one, rejected the applicant’s appeal and upheld the District Court’s judgment. It held as follows:
“As mentioned in the District Court’s judgment, the Supreme Court rendered a judgment on 17 December 1998 in case no. 166/1998, Gunnar Pétursson v. the Republic of Iceland, published at page 4406 of the Court’s Reports for that year. The appellant in that case requested an exemption from his liability to pay the industry loan fund charge and the industry charge for the years 1995 and 1996. He based his case on arguments that are to a significant degree identical to those invoked by the appellant in the present case. The Supreme Court accepts the view of the respondent in that the above-mentioned case must be regarded as the precedent in the case now to be determined, to the extent that the issues raised by the appellant in support of his present claim were determined in that case.
In the earlier case the appellant, as here, maintained that as a result of his liability to pay the industry charge, which is to be transferred to the Federation of Icelandic Industries, he was obliged to be a member of the Federation. The Supreme Court mentioned in its judgment that although the charge was transferred to the Federation, it was to be used for a certain purpose (see section 3 of the 1993 Act), and did not constitute a grant to the Federation. The use of the revenues was subject to the supervision of the Ministry of Industry. The Court accepted that this arrangement did not involve obligatory membership of the Federation of Icelandic Industries in breach of the Constitution and the European Convention [on Human Rights]. It also noted that even if the Federation of Icelandic Industries had exceeded the boundaries laid down in the [1993] Act, this could not have the effect of exempting the appellant from paying the charge. With this in mind, and in other respects by reference to the grounds stated in the contested judgment, the Court must reject the conclusion that the appellant’s arguments in this regard may lead to a granting of his request. Bearing in mind that the Federation of Icelandic Industries is under a legal duty to use the revenues from the industry charge for promoting Icelandic industries and industrial development, and consequently for the benefit of the activities being taxed, the Court cannot accept that the legislature thus exceeded its powers.
The appellant submits that equality was not respected, since enterprises under public ownership may be exempted from the charge. As regards this argument, it must be noted that various factors distinguish enterprises under public ownership from privately owned enterprises, and in various fields their taxation is governed by different considerations, as seen in Icelandic tax legislation in general. In his written submissions, the appellant did not present a comparison of his situation vis-à-vis any particular public enterprises. It has not been established that any discrimination has taken place between the appellant and the parties to whom the exemptions of the [1993] Act apply. Finally, the appellant bases his request on the assertion that the activity code enumeration, by reference to which taxation under section 2(1) of the 1993 Act takes place, is haphazard in nature. The charge is levied on industry, subsequently defined as any activity coming under the activity code numbers enumerated in the classification of Icelandic business activities in an appendix to the 1993 Act, as amended by Law no. 81/1996. Industry, thus defined, does not only cover manufacturing industry, but also processing and services, including the construction industry. This defines the activities to be included under the term ‘industry’ within the meaning of the [1993] Act, distinguishing them from other fields of economic activity, including activities that have developed within the fields of agriculture and fishing. Such classification of economic activity has furthermore been recognised as a basis for other forms of taxation other than the industry charge. The appellant’s claim cannot be granted on the basis of the arguments presented.”
19.  The dissenting member of the Supreme Court, Mr Justice Ólafur Börkur Þorvaldsson, gave a separate opinion containing, inter alia, the following reasons:
“I
The original Industry Charge Act was Law no. 48/1975. It was stated in the explanatory notes to the draft law that it had been submitted in accordance with a recommendation of the FII, the National Federation of Craftsmen, and the Union of Icelandic Cooperative Societies. These provided a detailed report, which apparently was adopted verbatim in the explanatory notes. It included the observation that ‘... it may be noted that industrial enterprises and self-employed persons in industry collect various taxes for public authorities, both from their employees and from the consumers. The tax collection they carry out and are responsible for amounts to thousands of millions annually, entirely without remuneration. It therefore seems reasonable that the State should undertake to collect, by way of compensation for these parties, a charge which amounts to only a small fraction of what they collect for the State. This source of revenue should create a financial basis for more active participation by professional federations within Icelandic industry in shaping future industrial development’. The Act also contained a provision similar to that of the Act now in effect, that the Ministry of Industry should be sent an annual report on the use of the revenues derived from the charge. In this context, it was mentioned in the explanatory notes that this was a ‘provision intended to ensure that public authorities will be given a reasonable account of how the industry charge is used’.
Law no. 48/1975 was superseded by the present Law no. 134/1993. It was stated in the explanatory notes to the [1993] Act that those liable for the charge would be the same as before, but a system of reference to activity code numbers in accordance with the business activity classification of the Bureau of Statistics was adopted in order to ‘remove any doubt as to who are liable for this charge’. It was furthermore provided that the revenues derived from the charge should be transferred to the FII in their entirety, whereas under the previous Act they had been distributed between the Union of Icelandic Cooperative Societies, the Canning Industry Sales Office, the Federation of Icelandic Industrialists and the National Federation of Craftsmen. At the same time the tax base was changed, since the municipal business tax, on which the level of tax had previously been determined, had been abolished.
II
According to the Articles of its Statute, the FII is a federation of enterprises, self-employed persons, trades and master builders’ associations, who jointly wish to pursue common goals as enumerated in Article 2. This Article states the purpose and role of the Federation in ten points, as involving the promotion of Icelandic industries in various ways and supporting the members by all the means which are detailed therein. According to the documents submitted, the association involves itself with political issues, for example as regards membership of the European Union and taxation in various fields. Pursuant to Article 8, each member of the Federation enjoys voting rights at its meetings in proportion to his paid membership fees. It is provided in Article 14 that the membership fees are a maximum of 0.15% of the previous year’s turnover, but the board of the Federation may decide to collect lower membership fees. The provision goes on to state that ‘[p]arties paying an industry charge that is transferred to the Federation shall have that part recognised, and deducted when their membership fees to the Federation are calculated. If the industry charge is no longer levied, this deduction shall automatically be abolished. The voting right of each member shall be calculated on the basis of his paid membership fee. Management and decision-making within the Federation is, as generally within associations, the responsibility of its board and the managing director’.
Documents submitted from the FII relating to the period to which the [applicant’s] requests pertain do not contain a clear breakdown of how the industry charge is used. It also appears from a comment in the Federation’s reports on the use of the charge for the years 2002 and 2003 that the Federation does ‘not keep separate accounts of whether the individual elements of the Federation’s operations are financed by monies derived from membership fees, capital income, or the industry charge’. A similar declaration on this point is found in the report to the Minister in respect of the year 2001, but a report for 2004 is not in the case file. The Federation’s reports to the Minister are also in other respects similar from year to year. In fact the case file seems to permit the inference that part of the charge is used for the general management of the Federation. It cannot be seen from the submissions in this case that the Minister of Industry has made any observations concerning the use of the charge, and in a letter to the Master Builders’ Association of 15 February 2002, following complaints relating to the use of the charge, he expresses the following opinion: ‘As can be clearly seen from the Industry Charge Act, the FII has the unrestricted power to decide how the charge is allocated, and the Ministry of Industry cannot interfere with this as long as it remains within the framework of the law.’ It can be seen from the submitted reports of the FII for the periods to which this case relates that the arrangement has been used for granting those members of the Federation who pay the industry charge a discount on their membership fees equal to the amount of the charge. As an example, the following comment in the Federation’s report to the Minister of Industry for 2003 may be quoted: ‘It may be pointed out that members who pay the industry charge have it deducted in full from their membership fees to the Federation. It would not be considered proper that companies within the Federation that are liable to the industry charge should pay more to the Federation’s activities than companies that are members, but not liable to the charge. In this way all the member companies of the Federation make equal payments to the Federation, irrespective of whether they are liable to the industry charge or not. On the other hand other companies, remaining outside, only pay the industry charge and thus make a contribution to the general protection of the interests of Icelandic industries.’
III
Provisions on freedom of association are found in Article 74 of the Constitution ... They contain more detailed rules on freedom of association than those directly expressed in Article 11 of the Convention ... Article 74 § 2 of the Constitution provides: ‘No one may be obliged to be a member of any association. Membership of an association may, however, be made obligatory by law if this is necessary in order to enable an association to discharge its functions in the public interest or on account of the rights of others.’
As noted above, the purpose of the industry charge is, according to the 1993 Act, the promotion of Icelandic industry, but it is also expressly provided that only the part of the charge corresponding to the cost of its collection is to be transferred to the State Treasury. The remainder is transferred to the FII, to be used as the Federation decides. It also seems that an unspecified proportion of the charge is used for the general activities of the Federation as its board may decide. It can furthermore not be seen from the provisions of the 1993 Act that the Minister of Industry is adequately empowered to ensure that the charge is used in the manner provided for in the Act; in this regard, the Minister simply receives the reports of the Federation. For these reasons the provisions of the 1993 Act cannot be regarded as ensuring that the charge will be used for the activities the Act requires.
The payment of membership fees to an association is generally a chief obligation of the members of an association that requires such payments. The applicant is a member of the Master Builders’ Association. Neither he nor his association is a member of the FII. The applicant does not agree with the Federation’s objectives in various fields, considering, as mentioned in the contested judgment, that the Federation acts contrary to his interests, and indeed also contrary to those of many others within industry who also pay the industry charge without being members of the Federation. Nevertheless, by virtue of the 1993 Act, the [applicant] is bound by a duty to pay the charge, which, as described, is transferred to a free association with the purpose of protecting the interests of those active in Icelandic industries and those of its members, as these interests are assessed at any particular time by a decision of the managing director and the board, without any significant involvement of public authorities.
When considering the above and the history of the 1993 Act, and in view of the use of the charge, without objection, for the general activities of the Federation, the arrangement provided for in the Act must be seen as involving, in fact, a duty on the part of the appellant to take a significant part in the Federation’s activities without his agreement. The above provisions of Article 74 § 2 of the Constitution, concerning people’s rights to remain outside associations, must be interpreted as prohibiting an arrangement such as provided for by the 1993 Act, unless that arrangement fulfils the requirements laid down in the second paragraph of the Article. The FII is not an association engaged in activities of the kind referred to therein. For this reason in itself, the appellant’s request for an exemption from his liability to pay the industry charge for the years 2001 to 2004 should be granted, and the respondent should be ordered to pay the appellant the costs of the case in the District Court as well as before the Supreme Court.”